The Shopping Cart Economist

Last December, I started the Shopping Cart Economist because I’d seen the writing on the wall for what was happening in the food market globally, and it didn’t look good for consumers.

I made some predictions for 2008 in specific categories and while I’d like to pat myself on the back for being right on in nearly every category, the sad thing is, I was right on in nearly every category - food prices did nearly exactly what I thought they were going to do, which was a bad thing for American consumers.

If you missed the blog post, you can read it here. But, here’s some highlights of what I predicted for 2008, and what really happened. *Note - these are non-sale prices.

Soda - due to the increase in the main ingredient, corn syrup, my thought was that a 2-litre of soda would hit $1.99 this year. 2-litre bottles sat forever at $.99c and this year, not only hit $1.99, but in some stores, I saw it as high as $2.19. The price of a retail 12-pk of coke right now? $6.59. A gallon of soda now costs more than double that of a gallon of gas, and nearly 1.25 times a gallon of milk.

Milk - My prediction was going to be that it would hit or come close to $4 a gallon. This summer, milk was astronomically high. A gallon of 2% store-brand (lucerne) from Safeway was $3.89 - just shy of that $4 a gallon mark. That’s not to say milk isn’t used as a loss leader for many stores, but to walk in and get a gallon with no coupon or sale, the retail price point was the highest I’d ever seen it.

The bigger shocker was in the price of dairy-processed foods. The most notable, which I was not expecting, was the price of Kraft Philladelphia Cream Cheese. Once easily available with no sale for $1.99 for 8-ounces (and always on-sale for .99c each), Kraft Cream Cheese in my neck of the woods had a retail price of $3.59 for 8-ounces. Talk about a jaw dropper - that’s a 55% increase in one year. Most branded icecream went to $6.59-$6.99 per half-gallon (which is really not a half-gallon at all - it’s 1.75qts), string cheese, for packages that had cost $4 at the beginning af the year went to nearly $9 a package. And the biggest kicker for me, Tillamook cheddar 2-pound baby loaves of cheese - $11.99 from $9.99 with the holiday sale prices only falling mometarily to $5.99 instead of the historical $3.99 for 2-pounds.

I have to say a big THANK YOU to the pork farmers of America. They managed to hold prices throughout the year on fresh pork products, and my hypothetical guess on this is that with beef prices as outrageous as they were, they managed to increase their market share with many people converting from beef to pork as a protein source. However, processed pork products had a pretty steep price increase for things like packaged bacons, sausages, and sliced deli ham. Sliced luncheon meats in general were astronomically priced this year with the generic store brands reaching as high as $7.99 a pound for sliced deli ham.

Eggs - as predicted, the price of eggs climbed, and we never saw relief even at times when egg prices normally fall (think Easter and other “baking” type holidays). Normal retail price for eggs could be seen as much as $3.29 a dozen, and even eggs at discount places like Costco were abnormally high. And cage-free or any of those types of products? Forget about it! There was no way I was paying over $5 for a dozen eggs - I’d rather build a chicken coop in my backyard. Which, ironically, people actually DID!!! In fact, this year, the price of eggs sent people to community egg co-ops where they joined in to raise their own eggs for less per dozen than they could be had at the store.

Grains/Breads - Sadly, we’re not going to come out of this, and what happened with bread/grain increases is just a foreshadow I believe into prices next year. Store brand generic white bread doubled in price to $1.99 retail, with brands like Sara Lee, normally the $1.99 price point, jumping to $3.69 per loaf. And specialty breads? My favorite french, La Brea, was $5 a loaf. Specialty flours and organic varieties were particularly hurt hard by price increases, so the cost per loaf for some breads crossed the $6 mark.

And cereals? Well, I hope you all took note of how General Mills came through for us with a 10-ounce box of cereal at the same price as what the 12-14 ounce boxes used to cost. $4.59 for a box of Quaker Oatmeal? I don’t hold much hope for the big Quaker sale that’s normally happens in January. I have yet to see the coupons for it, and I don’t believe we’ll see much under $2 a box on sale.

Beef - After a year of crazy beef prices with prices I’d never seen before, the Christmas ribeye in 2007 that failed to fall below $5 was back to its 2006 prices of $3.98 (yes, I stocked up!). The beef market has been hit hard by the economy. At one point, people couldn’t afford to buy it, and prices of fallen. But the beef industry is hurting as their costs of production are more than the price they are receiving for it at the market. And yet the price of a pound of ground beef in this morning’s ad was still $3.99 for 93% lean ground beef. Overall, beef prices climbed to a point that most Americans are still going to have a hard time affording.

Produce - my prediction was that we’d see more local produce in the market. Even I became my own producer this year thanks to George W’s economic tax stimulus rebate. But one of the things I’d mentioned was that local wasn’t going to mean the farmer’s market, rather, more stores would be buying local produce. Safeway and Albertsons in my area went as far as relabling their produce signs in the department to show country (or city/state) of origin on the produce. They’ve made a big fuss over buying local. And even Wal-mart, the store with connotations of outsourcing and killing local economies, is now the largest purchaser of local produce in the United States. And the local produce was priced right. If you were lucky enough to live in a market with good local produce production, prices for things like Gala apples (.68c per pound) and cucumbers (2 for $1) were the best deal going this year.

Sadly, as the world markets crumble around us, the food market is the only thing that seems insulated against falling prices which is bad for an American public in a time of financial crisis. More people have food access issues than ever before, with the highest number of Americans on food stamps ever happening this year.

I’ve got some predictions for next year’s prices which I’ll try to get posted here in the next few days before the new year, but I don’t think it’s going to be pretty.

Another year seems like it’s coming to a rapid close. For many, the year hasn’t been all that bright as we’ve seen gas over $4 a gallon, salmon as high as $30 a pound, food prices rise higher than inflation rates, global food shortages of rice, wheat, and other commodities, and global food scares. My kids’ idea about raising a cow in our side yard is looking better and better as beef is expected to climb to as high as 30% next year on fears that there will be grain shortages and the cost of feed will be outrageous. Then of course, factor in a global recession, an economic meltdown of record proportions, and pull back in consumer spending….the result is that food inflation is going to continue to grow disproportionately in the coming year. Quite frankly, and not to be a doom and gloomer, I think we’re in for a rough ride for the next several years where food is concerned.

Ironically, some of the same conditions that caused prices to rise are causing deflated prices in some food sectors. Beef, for example, is costing producers more to produce it that they are selling it for at market. But while a few market producers are facing supply cost challenges, we’re going to see some other things that will keep food prices inflated overall.

The big one that has me bothered going into 2009 is a water shortage in California which could have produce growers there on the ropes. California is one of the largest agriculture economies in our country. If you’ve never driven through the I-5 corridor between San Francisco and LA, you’re missing an amazing sight. No, not that it’s some beautiful stretch of land, because it isn’t. What’s amazing about that stretch of road is how they’ve converted an otherwise arrid desert into viable farm land by importing in an ocean of water to make food grow. Everything from lettuce to tomatoes to carrots and assorted fruits grow in that strange part of the land. Like flying over the midwest where you look out the windows and the ground below looks like checkerboards, driving through this part of California is the same type of experience….except that it’s patches of beautiful green farmed acreage mixed with desert and greenhouses.

It’s disconcerting that so much of our produce comes from this part of the US, and how with enough water, the crops can be forced to grow there year round. But with water shortages looming (not to mention labor issues in CA), I think we’ll see higher produce prices than we ever have. I found it ironic that one unnamed produce producer of bagged salads posted 10% profit increase with only a 1% increase in production. It means that between prices increasing and package size decreasing, food companies are managing to find a way to ride out the economy on the backs of consumers. Just a bit of food for thought the next time you pick up that 16.3-ounce jar of Skippy that once used to be 18-ounces.

Unfortunately, I don’t have any magical answers for consumers on how to combat rising food prices other than what we preach over at Hotcouponworld.com. Where I think we’ll see offsets that keep our households balanced is by leveraging the deflation on other parts of the economy. Gas is at a low not seen in 58 months. Consumer electronics, household goods, electronics, and just aboput every other product imaginable will be more affordable than ever as retailers work to stay afloat. But, we can’t eat laptops and digital cameras, so shop wisely.